A: LIFO and FIFO might sound like names of twin poodles. But they're actually crucial acronyms for investors to know and that will determine the bite Uncle Sam takes.

Both LIFO and FIFO are accounting methods that determine how taxes due on investment gains are measured. LIFO stands for "last in, first out" and FIFO is "first in, first out." LIFO and FIFO apply to investors who have bought multiple shares, or lots, of the same investments over time.

For instance, investors who buy shares of General Electric at the end of every year, or reinvest dividends, would have separate lots for each purchase.

When it's tax time, you pay capital gains taxes on your proceeds from selling the stock minus your cost. But the cost of the share varies depending on which lot was sold.

The difference between LIFO and FIFO treatment can be large. Imagine an investor who bought 400 shares of GE in 1977, reinvested all dividends, and sold 3,058 shares for $50,000 in November 2012. If the investor selected FIFO, the taxable gain would be $46,408.32, says Networth Services.

However, selecting the LIFO method would result in a $5,958.10 gain, Networth says.

Most brokerages' tax reporting for investors defaults to FIFO. But most brokerages allow you to change the treatment when you place a sell order.